Minimum Wages and Training Revisited

NBER Working Paper No. 6651Issued in July 1998NBER Program(s):Labor Studies

Theory predicts that minimum wages will reduce employer-provided on-the-job training designed to improve workers' skills on the current job, but may increase the amount of training that workers obtain to qualify for a job. We estimate the effects of minimum wages on the amount of both types of training received by young workers by exploiting cross-state variation in minimum wage increases. The evidence provides considerable support for the hypothesis that higher minimum wages reduce training (especially formal training) aimed at improving skills on the current job. At the same time, there is little or no evidence that minimum wages increase training undertaken to qualify for or obtain jobs. Consequently, it appears that, overall, minimum wages substantially reduce training received by young workers.